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LDM Input Page -
A Tutorial

This
is the "look and feel" of the model's input page. It
is the one
and only page where data is entered. Links
are provided to jump around the website to describe and illustrate how
the
model works.

Data
entry is easy. A couple times
through and you
will
have it. Again, the input page is the
one and only page for data entry? More specifically, the input
column
is the one and only column that data is entered. Scroll
down to this column - the white fields are
the entry
points.

The land development components
such as number of phases, number of lots, average sale price of lots,
and so on down the line are displayed in the second column of the input
page. The components are categorized under headings such as lots and
phases, land cost, timing of land purchases, sale costs/builder deposits, options, and project type.
See
list of components.

The prompt column is
where
directing, correcting,
and model consistency prompts assist
you in
the data entry process. For instance, note that line 8 in
the prompt
column (a correcting prompt) indicates '<
OK'. This is because line 4
and line 8 of the input column are equal, or consistent. Had
they
not been, the prompt would have been '< Error, lines 4 and 8
must be
equal'. Click
here to see how prompts direct
data input
and alert you to entry errors and model inconsistencies.

The output tables and schedules
column
is where you navigate to model results such as annual
profit and cash
flow tables, a project summary table, a profit by phase table, etc.
Simply click on the output you wish to see. Click to
go to the model output
page.There
are three field-clearing
macros and one auto-entry
macro incorporated
to the input page. Although it is not mandatory to enable
them, they make data entry easier and more
efficient. One of the field-clearing macros clears all model
input
with one click on the clear all
variables button. Another clears absorption
and interest rate entries, thereby enhancing 'what-if'
analysis. The
third
one clears entries fortotal
acres and acres per phase. Finally,
the auto-entry
macro inserts the four typical
lender requirements
to the model. You can manually alter these auto entries
depending on actual lender requirements.

The convenience of the macros will become self-evident as
you
conduct 'what if' analysis on the many land development
components
and begin to routinely save various project scenarios.

See input fields below.
This is a 3 phase project with 91 lots. 27 lots is Phase 1, 33
lots in Phase 2 and 31 lots in Phase 3.

The "Snip-It" below is
illustrative of 8 of the Input Page entry cells from Versions 1, 2
and 3. The current version 4 includes new entry cells for frontage lots
and subdivision lots and removes the page links in red below. Navigation is now by tabs at the bottom of all model pages.

See
input fields below. The total land cost is $1,626,000 with the cost of
each Phase allocated as noted. The builder is putting up deposit
money for all three phases and project (type) is a three phase project
with an option to purchase the phase 3 land.

Note
that What If analysis can be used to isolate how much a developer or
investor can pay for raw land while meeting pre-determined profit
criteria. Appraisers can use the LDM to estimate or support land value. Click here for an example.

A note about project type. The
model
allows for analysis of one, two, or three phases, as well as
the
analysis of land options. Of course the land
purchased for
a one phase project cannot be optioned. On a two phase project, the land for both phases can be purchased
at
once or an
option
can be negotiated for the phase two land. A three phase project has
four possible land purchase possibilities. A drop down menu with the
seven
project types
is provided on line 14of
the model. Click for
a discussion of project types.

Click here for a discussion and ilustration of how real estate options affect interest costs and profitability.

The average sale price
of Phase 1 lots is $75,000. The average sale price of the Phase 2 lots
is $76,000 and the average sale price of the Phase 3 lots is $72,500.
Sale costs total 4 percent of gross revenue. Builder
deposits are $200,000 for Phase 1, $225,000 for Phase 2 and $175,000 for Phase 3. Click here for a discussion and illustration of how builder deposits impact interest cost and profitability.

Note that the Profit Summary is visible on the LDM Input page.These measures, and many more, are
displayed on
the model's output pages, but also here. Click here for a discussion of profit measures displayed on the LDM Input Page.

The
"Snip-It" below is
illustrative of entry cells from Versions 1, 2
and 3. The current version 4 includes new entry cells for frontage lots
and subdivision lots (e.g. lines 16, 17, 18 and 19 now relate to
"subdivision" lots. "Frontage" lots are integrated to version 4.

The average development cost of Phase 1 lots is $35,000. The average
development cost of the Phase 2 lots is $34,500 and the average development cost
of
the Phase 3 lots is $28,000. Lines 28, 29 and 30 are entry points for
costs not included in the average cost estimates (e.g. possibly real estate taxes, cost of options, cost of permitting,
extraordinary offsite cost, etc.). Note that these quantities are entered in dollar amounts (not per lot amounts).

The construction of Phase 1 begins March 1 and the first lot sale occurs on August 1. The duration
of the initial construction period
has a significant impact on project profitability.
The
shorter the construction period, the more profitable the project. In
other words, the shorter the construction period the faster you can
begin
the
business of selling lots. However, the developer
often
has
little control over this component. Construction may be delayed for a
variety of reasons - weather conditions, permitting issues, material
shortages, contractor problems, and so on. The construction and holding
period can be adjusted from one to eleven months.

The
absorption rate is 1 lot per month. Note the minimum absorption rate
below line 36 that is auto-calculated and the comments regarding
the clearing of
absorption on line 35 and interest rates on lines 37 through 41. There
is a Clear Absorption macro provided to expediate
this requirement. Click here for a discussion and illustration of how the absorption rate impacts profitability.

The interest rate
that accompanies an acquisition and development loan generally
is
tied to a published rate such as the prime rate. The
model allows
the user to factor the interest rate trend, up, down, or flat, into the
profitability
estimate.

Below
the interest rate on the bank loan is 6 percent. The estimated trend
calls for a 1 percent increase in year 2 remaining stable for the
remainder of the project.

Most
land
developments are financed with a bank loan.
Naturally banks have a set of lender requirements
upon which the loan is based. For instance, they will
require that the
loan is paid off by the time a certain percentage of lots are
sold. They will require that a certain percentage of the revenue from
each lot sale be applied to loan reduction. They will require the
developer to contribute, in cash and/or subordinated loans, a certain
percentage of the initial cost of the project. Another way to say this
is, the
bank will lend up to a certain percentage of the initial cost
of
the project. And finally, in the case of a phased project with no
option agreement(s), the bank will lend a certain percentage on
residual land (land purchased up front by the developer to be used for
future phases).

Typical
rates are as noted but they vary from lender to
lender. Macro provided. Note that line 43 should be modified to roughly
equate the model result and lender requirement.

Many
times it is difficult for a developer/investor to come up with
the initial cash requirement. This problem can, and often is,
resolved if the landowner agrees to provide seller
financing.In this case seller
financing is available in the amount of $300,000 at 4 percent for 5
years (60 months). Note the model parameters on lines 49 and 52. Click here for a discussion and illustration of how seller financing affects profitability.One
of the model assumptions is that the
developer's ownership is in the form of a
pass-through entity (e.g. S-Corp, LLC). As such
the entity is
not
taxed,
but project
income flows through to the owner personally and is
taxed at his or
her marginal tax rate. No
matter what the investor's filing
status or percentage ownership, all
owners deal with profit before tax. With this in
mind, the focus most often will be on the before tax
numbers generated
by the model.The
model allows owners to calculate individual tax
liability
by entering applicable percentage ownership and
filing status
on lines 53 and 54. These entries are not mandatory for model calculation results.

In this case there are 102 acres in all three phases and the
developer/investor must purchase Phase 1 and Phase 2 up front while
maintaing an option to purchase Phase 3. Note the prompt column
directives.

Like income tax entries, total
acres and acres per phase are not mandatory input entries. This is to
say that the profit and cash flow calculations
will be unaffected if entries
are
not made here. The project summary table is enhanced, however,
if entries are made on line 55 and lines 57 through 61.

Talk of per acre prices is commonplace in the land business,
but
price per lot is actually a much more important measure.

The
model consistency
section
of the model alerts the user to inconsistencies as well
as entry and non-entry errors. It also prompts and directs you
to the entry inconsistencies and/or omissions.All output displays should be Yes or N/Aor
you have made one or more entry errors. This
is how the model consistency section will look if the input column is
completed properly.

If you
wish to ask us a question about the model, 'Contact
Us' and we will get back to you
as soon as possible.

Or,
if you have seen enough and would like to purchase the
LDM, click the
'Buy Now' link below. The purchase is totally refundable
if you are not 100 percent satisfied.

Price $45.00

If you are not yet ready to purchase the model and would like to read my narrative entitled "Land Development Basics", (28 pages), click on the Buy Now
link below. The narrative is written from my perspective and
experience from the residential land development business
while relating various land development components such as
the timeline concept and the three stages of the land development
process directly to the LDM.

Because my internet retailer
is a for-profit organization and this is an e-product that they help
me sell, I am required to charge a minimum of $3.00.
Sorry about that!